Managerial Accounting: Tools for Business Decision Making 7e Binder Ready Version + WileyPLUS Registration Card
7th Edition
ISBN: 9781119036449
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: Wiley (WileyPLUS Products)
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 6, Problem 6.6BYP
To determine
Contribution Margin: The process or theory, which is used to judge the benefit given by each unit of the goods produced, is called as contribution margin.
To Write: A short memorandum to Person B describing the analysis that the company should do before it makes the decision and other consideration that would affect the decision.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Konica Minolta plans to sell a copier that prints documents on both sides simultaneously, cutting in half the time it takes to complete big commercial jobs. The faster copier is expected to increase profit by $2,500,000 per year, regardless of which of the following rollers the company uses in its copiers. The estimated costs associated with chemically treated vinyl rollers and fiber-impregnated rubber rollers are shown below. Determine which of the roller types should be selected on the basis of an ROR analysis assuming the company’s MARR is 25% per year. Roller Type Treated Impregnated First cost, $1000 −5000 −6500 Annual cost, $1000/year −1000 −650 Salvage value, $1000 100 200 Life, years 5 5
Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $160,000 for the company as a whole. In addition, the following information is available about the three products:
Large
Medium
Small
Unit selling price
$353
$253
$133
Unit variable cost
(278)
(207)
(117)
Unit contribution margin
$ 75
$ 46
$ 16
Autoclave hours per unit
6
4
2
Total process hours per unit
12
8
6
Budgeted units of production
2,600
2,600
2,600
a. Determine the contribution margin by glass type and the total company operating income for the budgeted units of production.
Large
Medium
Small
Total
Units…
Guthrie Generators manufactures a solenoid that it uses in several of its products. Management is considering whether to continue
manufacturing the solenoids or to buy them from an outside source. The following information is available:
1. The company needs 20,000 solenoids per year. The solenoids can be purchased from an outside supplier at a cost of $15 per unit.
2. The unit cost of manufacturing the solenoids is $20, computed as follows:
Direct materials
Direct labor
Factory overhead:
Variable
Fixed
Total manufacturing costs
Cost per unit ($400,000 ÷ 20,000 units)
3. If the company decides not to manufacture the solenoids, it will eliminate all of the raw materials and direct labor costs but only 75
percent of the variable factory overhead costs.
4. If the solenolds are purchased from the outside source, machinery used in the production of solenoids will be sold at its book value.
Accordingly, no gain or loss will be recognized. The sale of this machinery would also eliminate $5,000…
Chapter 6 Solutions
Managerial Accounting: Tools for Business Decision Making 7e Binder Ready Version + WileyPLUS Registration Card
Ch. 6 - What is meant by CVP analysis?Ch. 6 - Provide three examples of management decisions...Ch. 6 - Prob. 3QCh. 6 - Describe the features of a CVP income statement...Ch. 6 - The traditional income statement for Wheat Company...Ch. 6 - Prob. 6QCh. 6 - What is meant by the term sales mix? How does...Ch. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - What is the theory of constraints? Provide some...Ch. 6 - What is meant by "cost structure? Explain how a...Ch. 6 - What is operating leverage? How does a company...Ch. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Distinguish between absorption costing and...Ch. 6 - Prob. 18QCh. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - Prob. 22QCh. 6 - Determine missing amounts for contribution margin....Ch. 6 - Hamby Inc. has sales of 2,000,000 for the first...Ch. 6 - Prob. 6.3BECh. 6 - Prob. 6.4BECh. 6 - Prob. 6.5BECh. 6 - Prob. 6.6BECh. 6 - NoFly Corporation sells three different models of...Ch. 6 - Information for NoFly Corporation is given in...Ch. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - In Marshall Company, data concerning two products...Ch. 6 - Prob. 6.12BECh. 6 - Prob. 6.13BECh. 6 - Prob. 6.14BECh. 6 - Prob. 6.15BECh. 6 - Compute product costs under variable costing. (LO...Ch. 6 - Compute product costs under absorption costing....Ch. 6 - Prob. 6.18BECh. 6 - Prob. 6.19BECh. 6 - Victoria Company reports the following operating...Ch. 6 - Prob. 6.2DICh. 6 - Zoom Corporation manufactures and sells three...Ch. 6 - Prob. 6.4DICh. 6 - Prob. 6.1ECh. 6 - In the month of June, Jose Heberts Beauty Salon...Ch. 6 - Compute net income under different alternatives....Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.5ECh. 6 - Yard Tools manufactures lawnmowers, weed-trimmers,...Ch. 6 - PDQ Repaint has 200 auto-maintenance service...Ch. 6 - Express Delivery is a rapidly growing delivery...Ch. 6 - Prob. 6.9ECh. 6 - Determine break-even point in dollars for two...Ch. 6 - Mars Company manufactures and sells three...Ch. 6 - Compute contribution margin and determine the...Ch. 6 - Helena Company manufactures and sells two...Ch. 6 - The CVP income statements shown below are...Ch. 6 - Casas Modernas of Juarez, Mexico, is contemplating...Ch. 6 - Prob. 6.16ECh. 6 - Compute product cost and prepare an income...Ch. 6 - Prob. 6.18ECh. 6 - Crate Express Co. produces wooden crates used for...Ch. 6 - Midlands Inc. had a bad year in 2016. For the...Ch. 6 - Lorge Corporation has collected the following...Ch. 6 - Determine break-even sales under alternative sales...Ch. 6 - Prob. 6.4APCh. 6 - The following CVP income statements are available...Ch. 6 - Bonita Beauty Corporation manufactures cosmetic...Ch. 6 - Prepare income statements under absorption costing...Ch. 6 - Dilithium Batteries is a division of Enterprise...Ch. 6 - CURRENT DESIGNS Current Designs manufactures two...Ch. 6 - Prob. 6.1BYPCh. 6 - Managerial Analysis For nearly 20 years,...Ch. 6 - Real-World Focus In a recent report, the Del Monte...Ch. 6 - The June 8, 2009, edition of the Wall Street...Ch. 6 - Prob. 6.6BYPCh. 6 - Ethics Case Brett Stem was hired during January...Ch. 6 - Prob. 6.9BYP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas City, and the other in Tulsa. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for 1,620. Sales volume averages 20,000 units per year in each plant. Recently, the Kansas City plant reduced the price of the tilt model to 1,440. Discussion with the Kansas City manager revealed that the price reduction was possible because the plant had reduced its manufacturing and selling costs by reducing what was called non-value-added costs. The Kansas City manufacturing and selling costs for the tilt model were 1,260 per unit. The Kansas City manager offered to loan the Tulsa plant his cost accounting manager to help it achieve similar results. The Tulsa plant manager readily agreed, knowing that his plant must keep pacenot only with the Kansas City plant but also with competitors. A local competitor had also reduced its price on a similar model, and Tulsas marketing manager had indicated that the price must be matched or sales would drop dramatically. In fact, the marketing manager suggested that if the price were dropped to 1,404 by the end of the year, the plant could expand its share of the market by 20 percent. The plant manager agreed but insisted that the current profit per unit must be maintained. He also wants to know if the plant can at least match the 1,260 per-unit cost of the Kansas City plant and if the plant can achieve the cost reduction using the approach of the Kansas City plant. The plant controller and the Kansas City cost accounting manager have assembled the following data for the most recent year. The actual cost of inputs, their value-added (ideal) quantity levels, and the actual quantity levels are provided (for production of 20,000 units). Assume there is no difference between actual prices of activity units and standard prices. Required: 1. Calculate the target cost for expanding the Tulsa plants market share by 20 percent, assuming that the per-unit profitability is maintained as requested by the plant manager. 2. Calculate the non-value-added cost per unit. Assuming that non-value-added costs can be reduced to zero, can the Tulsa plant match the Kansas City per-unit cost? Can the target cost for expanding market share be achieved? What actions would you take if you were the plant manager? 3. Describe the role that benchmarking played in the effort of the Tulsa plant to protect and improve its competitive position.arrow_forwardYoungstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $85,000 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $184 $160 $100 Unit variable cost 130 120 76 Unit contribution margin $ 54 $ 40 $ 24 Autoclave hours per unit 3 2 1 Total process hours per unit 5 4 2 Budgeted units of production 3,000 3,000 3,000 Second Add the following information and answer the question below: Youngstown has 1,700 autoclave hours and no more. Maximum consumer demand for the 3 products is: Large = unlimited, Medium…arrow_forwardIn 1926 Branky scott and his wife GV started a small company in India that pioneered the use of plastics in the manufacturing of marine products. Branky Manufacturing has evolved to produce thousands of products under the Branky Trademark which are sold into the fishing, marine, outdoor, and firefighting industries worldwide. To manage production costs, Branky is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production:- Annual additional tooling costs would be $400,000- Annual inventory would decline by 80 percent from the current level of $4,000,000- Insurance, material handling, and set-up costs which currently total $1,200,000 annually, would decline by 25%- Rework would be reduced by 30 percent. Branky currently incurs $800,000 in annual rework costs.Improved product quality under JIT production would enable Branky to raise the price of its products by $8 per unit. Scotty sells 80,000 units per year.- Branky required…arrow_forward
- The manager of the SkyHigh division of Superball Corp. is faced with a decision on whether or not to buy a new machine that will mix the ingredients used in the SkyHigh superball produced by the SkyHigh division. This ball bounces as high as a two-story building upon first bounce and is so popular that the SkyHigh division barely keeps up with demand. The manager is hoping the new machine will allow the balls to be produced more quickly and therefore increase the volume of production within the same time currently being used in production. The manager wants to evaluate the effect of the purchase of the machine on his compensation. He receives a base salary plus a 25% bonus of his salary if he meets certain income goals. The information he has available for the analysis is shown here: Cost of the machine 2,000,000 Income to be generated by the machine 1,000,000 Income without the new machine 7,000,000 Beginning capital asset (without machine) 8,000,000 Ending capital asset…arrow_forwardIn the last 6 months, demand for one of Appleby Company's products has dropped off considerably, due mainly to it becoming obsolescent as a result of technological change. Knowing that the equipment used in the manufacture of this product may not be easy to sell, Appleby spent $50,000 on consultants to determine whether it could use the equipment to produce a new product under license by another company. The consultant has determined that this product would have variable production costs of $65 per unit and should sell at a price of $90/unit. The licensing royalty is 5% of gross product revenue. Estimated annual demand is 20,000 units per year. Additional annual operating costs related to this product are $30,000/year (excluding depreciation). Depreciation on the equipment is $15,000. Annual depreciation expense is a: O a. Sunk cost O b. Relevant cost O c. Both sunk and Irrelevant cost Od. Irrelevant costarrow_forwardYoungstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $301,000 for the company as a whole. In addition, the following information is available about the three products: Line Item Description Large Medium Small Unit selling price $94 $253 $498 Unit variable cost (74) (207) (438) Unit contribution margin $ 20 $ 46 $ 60 Autoclave hours per unit 2 4 6 Total process hours per unit 6 12 12 Budgeted units of production 5,300 5,300 5,300 a. Determine the contribution margin by glass type and the total company operating income for the budgeted units of production. Line Item Description Large Medium Small Total…arrow_forward
- The manager of the SkyHigh division of Superball Corp. is faced with a decision on whether or not to buy a new machine that will mix the ingredients used in the SkyHigh superball produced by the SkyHigh division. This ball bounces as high as a two-story building upon first bounce and is so popular that the SkyHigh division barely keeps up with demand. The manager is hoping the new machine will allow the balls to be produced more quickly and therefore increase the volume of production within the same time currently being used in production. The manager wants to evaluate the effect of the purchase of the machine on his compensation. He receives a base salary plus a 25% bonus of his salary if he meets certain income goals. The information he has available for the analysis is shown here: Cost of the machine 2,000,000 Income to be generated by the machine 1,000,000 Income without the new machine 7,000,000 Beginning capital asset (without machine) 8,000,000 Ending capital asset…arrow_forwardYoungstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $85,500 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $182 $160 $98 Unit variable cost 131 125 76 Unit contribution margin 51 35 22 Autoclave hours per unit 3 2 1 Total process hours per unit 5 4 2 Budgeted units of production 3,000 3,000 3,000 Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production. Prepare an analysis showing which product is the most profitable per…arrow_forwardConcord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 9.000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $19,900 at the end of its ten-year life. Concord…arrow_forward
- Futura Company purchases the 66,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.10 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: Direct materials. Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 7.00 2.20 1.80 1.20 0.40 0.50 $ 13.10 Total $ 118,800 $ 79,200 $ 33,000 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $118,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant and can't be avoided. The total rent on the plant is $81,000…arrow_forwardDurham Corporation has a Motor Division that produces motors of various types. The company's Machine Products Division has asked the Motor Division to provide it with 20,000 special motors each year on a continuing basis. The special motors would require $100 per unit in variable production costs. The Machine Products Division has a bid from an outside supplier of $119 per unit for the motors. In order to have time and space to produce the new motors, the Motor Division would have to cut back production of another motor, the RX100, which it presently is producing. The RX100 sells for $130 per unit, and requires $102 per unit in variable production costs. Boxing and shipping costs of the RX100 are $10 per unit. Boxing and shipping costs for the new special casting would be only $7 per unit. The company is now producing and selling 100,000 units of the RX100 each year. Production and sales of this motor would drop by 20% if the new motor is produced. 1. What is the minimum acceptable…arrow_forwardMirabel Manufacturing is a small but growing company that manufactures and sells marine sonar equipment. They employee a national sales force and their primary customers are marine retailers and boat dealerships. The company has expanded over the last 5 years and Paul Mirabel, the founder and CEO has become concerned that he no longer has a clear picture of their cost structure. He calls his CFO, Mary Jane Montgomery in for a meeting. “Mary Jane, I am concerned that I am not current on our cost structure and how that is impacting our bottom line,” Paul begins. “Well, Paul, the company has grown considerably over the past 5 years, so I’m not surprised that you feel a little disconnected with how things are going,” Mary Jane replied. She continued “In fact, I’ve been meaning to talk to you about a couple of big items such as increasing the sales commission to 15%. We’ve lost two of our best account managers in the last 9 months. It seems like we are behind the curve paying only 12% on…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
alue Chain Analysis EXPLAINED | B2U | Business To You; Author: Business To You;https://www.youtube.com/watch?v=SI5lYaZaUlg;License: Standard Youtube License